Rwanda’s Strategy for Business and Development

An Interview with Rwanda Development Board CEO Clare Akamanzi

February 23, 2018

Clare Akamanzi serves as chief
executive officer of the Rwanda Development Board, the Rwandan government
cabinet agency tasked with helping oversee Rwanda’s business regulations,
foreign investments, tourism promotion, environmental conservation, and broader
economic and development planning. Akamanzi has also served as Rwanda’s trade
negotiator to the World Trade Organization, as chair of the holding company
overseeing several Rwandan aviation groups, and as head of Strategy and Policy
in the office of Rwandan President Paul Kagame. The HIR
recently spoke with Akamanzi about Rwanda’s economic successes and its
potential economic and international relations challenges.

What is the role of the Rwanda
Development Board, in contrast with other government bodies that oversee or
directly influence the economy? How was the Board initially formed?

The Rwanda Development Board was established in 2008, and the
main role that we were given on that date is to fast-track Rwanda's economic
development by increasing the share of the private sector in GDP. What that
means is that anything to do with Rwanda's private sector and what it needs, in
terms of thinking about what the private sector needs in the future but also
what it needs today, is included in our role. We work very closely with
ministries like the Ministry of Finance, the Ministry of Trade and Industry,
the Ministry of Construction, but the role of most of these ministries is to
develop policies in their respective sectors. Our role is to implement those
policies by bringing the private sector and private businesses to play a more
direct role in economic development. It's really promoting the private sector
for the country.

Representatives of the
G20 countries recently dropped a commitment to "resist all forms of
protectionism," and some fear that this could lead to a potential rise in
protectionism around the world. What has been the reaction to the G20 move in
Rwanda? How do you think Rwanda could potentially be impacted by such increased
barriers to trade?

Rwanda believes in free trade. We have liberalized our economy.
We have no restrictions in our sectors, so if you want to come and become a
telecoms or a manufacturing player, you're free to do that—there's no
restriction that we have. That said, we do understand that sometimes countries
need to develop their own policies, to develop their own sectors, because
everyone is trying to grow their own economies. Rwanda's view on that is that
governments should do their best in promoting the capacity of their sectors,
such as making their farms competitive with the rest of the world. But we don't
believe in putting in place barriers to stop the flow of trade.

I think [potential new trade barriers] have to be looked at on
a case by case basis. It depends on what barrier you're talking about and it
depends on whether that barrier is actually contravening rules of the World
Trade Organization.

Development aid
comprises a large portion of Rwanda's government spending, but some politicians
in the United States and Western Europe have suggested steep declines in their
aid commitments. How would Rwanda handle such a potential decline in
development aid?

We've never been naive to think that aid is going to be
available forever. We've always viewed aid as temporary, and we've always
viewed aid as a means to getting to some sustainability so that the country can
build on its own. Because of that, our approach towards development aid has
been: what is the best we can make out of aid today, so that we can build the
capacity within the country so that Rwandans can stand on their feet in the
future.

Have we gotten there? Not yet. But we've made a lot of
improvements. In 2011, the share of development aid over all the revenues that
we had for our budget was about 50 percent. Today, that has decreased to 25
percent. And so, today, our reliance on development aid has been substantially
reduced, but it's still important, because it still helps us. Now, if
development aid is no longer available in the future, I think that's just a
wake-up call for countries like Rwanda to see what they can do with the
resources they have. Development aid is something that has always been out of
goodwill, and something that has always been as a means to support us to become
able to look after our own priorities. And so we have not been, as I said in
the beginning, naive that it's going to be there forever. The question is, to
the extent that we have access to aid, how can we make the most of it while we
can?

How would you evaluate the progress or
the work of the Rwanda Development Board over the past decade in helping to
bring about that reduced reliance on aid?

Our organization is almost on the other side [of development
aid], because our role is to make Rwanda less dependent on development aid by
increasing the tax base, [such as] through private sector growth. Our goal, for
example, was that by 2020 we wanted investments' share of GDP to reach 20
percent. And now we're looking at [a share of] about 17 percent, whereas, just
a few years ago, we're talking about 12 percent of GDP. It's growing, but it's
definitely not where we want it to be yet, and I think it's very much a work in
progress.

What are some of the primary barriers
at the moment to reaching the goal?

I probably would group the key challenges into about four
categories. The first one is just making red tape less and less evident in the
country, by making it easier to start a business, making it easier to register
property, and making it easier to buy land and get your papers in hand, and the
measure that we've used to see how much progress we're making has been the
World Bank Doing Business report. In
that report, you can see indicators for Rwanda have been improving over time.
Today, we are the second-easiest place to do business in Africa. We're the 56th
in the world. That's a lot of progress when you're talking about, 15 years ago,
being around the 170th.

The second part has really been making Rwanda known, so
investors can come and invest in the country. To do that, we work with the
international offices that we have—we have embassies all over the world, and we
also have our own RDB offices that we've established in some countries, and
we're going to be increasing that also going forward—for instance, in China, in
Canada, and in other key markets.

The third thing that we've done is with infrastructure. For
example, we used to have some of the most expensive power to consume. We've
doubled our electrical capacity from about 100 to about 230 megawatts, which
means availability in more places and prices going down. Our goal is to bring
the cost of power down by half, to about 10 to 12 cents per kilowatt hour,
which is really a very, very key goal. We're also renovating our airport,
because tourism is very important and because we want to become a long-distance
hub within the region. The airport has become small. We now need to increase it
to accommodate about 4 million passengers, from less than about 800,000 that we
have today. We have a new project that has just started construction last year.
Infrastructure is going to remain a key area that we're going to be focusing
on, so that investors can come and find good infrastructure, that’s affordable
and reliable.

The last component is access to money to invest in the country.
Around 15 years ago, almost all the banks in Rwanda were owned by the
government, and certain inefficiencies come with state-run enterprises. We
decided to privatize to bring more private sector participation and innovation,
and more money that could be invested. We've moved from about three or four
banks 15 years ago to about 12 banks, with commercial products that are
increasing credit. We've seen credit increase for the private sector, because
of the availability of these banks in the country. On the other side, we want
to look at cheaper costs of financing, so we're looking at other ways money can
come in other than through conventional lending, and whether it's venture
capital or angel investors or people who can invest at a much lower cost—this
is something that we're very much looking forward to.

In the World Bank's 2017 Doing Business report, many of the
countries neighboring Rwanda rank far lower than Rwanda. How do you think this
disparity has influenced Rwanda's approach to economic planning or to pursuing
trade?

Rwanda would benefit a lot from more international trade,
especially if the entire region that Rwanda belongs to made it easier and
easier to trade across. We are very big advocates for regional integration; in
fact, Rwanda is probably one of the most enthusiastic countries in the African
continent when it comes to integration. We believe that if we work together,
our small countries eventually become big and compelling for investors who want
to come and invest in these countries. We can also bring forces together to be
able to do big infrastructure projects that we couldn't afford otherwise on our
own. Have we achieved that ambition or that wish? Not as much as we would like
to. We wish we could collaborate more with the other countries, we wish we
could do more integration, but we recognize that coordinating one country as
opposed to coordinating five countries—or six countries or ten countries or
even the whole continent—is not easy.

There is progress that has been made, if you look at regional
trade within the East African Community, for example, or even just trade within
Africa, or even investments. Kenya and South Africa are among the top five
investors in Rwanda, which is really something many wouldn't expect from an
African country. Trade within the African continent has been improving, but
obviously, if we did a lot more to integrate and to improve how the flows
happen, we'd have done even much better, and that's what we wish for.

I also think that we have different comparative advantages as
countries, and disadvantages. Rwanda is a landlocked country: to go to the
coast we have to go through another country, and that increases the cost of
doing business in Rwanda. We're also a country of 11 million people, and we
believe that some companies want markets of 130 million people or 150 million
people. We have to do a lot more to become more competitive, because we have
these disadvantages. And so, we work very hard to improve our competitiveness
in other areas. If that is going to bring an investor to come to Rwanda, then
we will sleep knowing that we've done what we wanted to do.

The Doing
Business report certainly shows Rwanda making significant improvements, but
what are some of the major successes or challenges that the World Bank’s
quantitative rankings do not highlight?

The
Doing Business report shows the cycle
that a business undergoes from the time of starting a business to the life that
it goes through as a business. For a certain kind of business, you have to go
to a bank to get money, and you might want to buy a warehouse and need to get
papers registered for a warehouse. There are [other questions like] how are the
courts functioning with disputes, how are contracts enforced, and what is the
process of going bankrupt. I think it really covers the ease of doing business
in the whole spectrum, but on our part we know that that is not enough. There
are [still] other areas that we look at as a country in addition to the World
Bank report. For example, the cost of doing business [and] the cost of
infrastructure are not covered by the report but are very important to
businesses.

You mentioned privatizing banks
earlier. The Rwandan government currently oversees several other state-owned
enterprises, such as RwandAir. How would you describe the government’s approach
to privatization versus operating these state-owned enterprises?

The Rwandan government would rather be holding
other responsibilities than investing [directly with businesses]. We have
limited resources, so if we could spend those resources on education or health,
as opposed to starting an airline like RwandAir, we would do that. The fact
that we're still investing in some of those sectors is, first, because the
private sector hasn't completely felt able to get involved, and so we sometimes
go and invest in a project because we want the private sector to see that it is
possible to make money, and we've had so many examples that we've demonstrated.
The first five-star hotel was invested in by the government. Now, we have about
three or four five-star hotels in the country that are run by the private
sector, but first we had to take the risk to demonstrate that one could make
money by charging five-star rates in a country like Rwanda and still be able to
sustain a business. So government will still do that for that demonstration
capacity.

The second reason is that some areas are
resource-intensive in nature and take a while for there to be basic economic
returns. If a private company wanted to invest in an airline today, I’m sure
the government would step aside and let them take over, but it's a very
capital-intensive business and it requires a lot of patience to make money.
Most of the private sector wants to make money in 5 or 10 years and cannot
afford to wait 20 years, but the government can afford to do that because it
has other sources of revenue. Where there's appetite in the private sector,
like with banks or telecoms or manufacturing, you will not see the government
because there's enough appetite for others to get involved. The hope is that we
will have shown the private sector the way and then we can pull out and they
can continue.

The Vision 2020 Umurenge Program has in
particular economically supported many women and households run by women. How
would you evaluate the impact of Rwanda's economic planning on women in
society? More generally, what kind of cultural impact do you think the economic
planning of the last two decades might have had?

I think central to Rwanda’s economic planning has
been decentralization. Decentralization means localizing economic development
to the people at the most micro level you can think of, so that benefits are
very apparent even to small families within a village. That's why programs like
Vision are actually meant to support the very bottom of the pyramid in the
country.

Now, women are a very big part of that population
we're talking about, so that decentralization program has been supported by a
very strong gender program: we have a gender policy and committees that go to
the grassroot level, and these offices are just looking at women in particular.
Are women getting the opportunities that these projects are bringing? Are they
getting health? Are they given baths in hospitals? Are their children
malnourished or eating well? Combining a gender-sensitive policy with
decentralization at the very lowest grassroot level has made it very possible
for Rwandan women to benefit from economic development.

Culture is very important. What we've done is
that we've not forgotten culture in our planning. We have what we call
home-grown solutions—solutions that are very much traditional or cultural in
Rwanda's perspective to economic development. [Our programs include] a program
where we support the very poorest in society by giving them a cow. A cow is a
very cultural symbol, and giving someone a cow is almost like an inheritance
that you get to start off on your own. A cow is a very revered and very
respected asset. By giving someone this asset, not only do they feel empowered
because this is a very important symbol in Rwanda's culture, but also
economically it gives them the ability to [expand their assets] because they
can get children from that cow if they partner the cow with different bulls to
reproduce. They keep the offspring and then the second offspring they give to
the next poor family. The communal nature benefits from sharing offspring, so
that many people can get benefits from that. At the same time, it helps with
ensuring that women have access to mlk to give to their children so that their
children don't starve. Any extra milk they have they can sell to markets, so
it’s introducing a market system [which can be key to the] subsistence of a
family. All these pieces go together as parts of Rwanda's comprehensive
economic development policy.

I think Rwanda’s goal has been to create a
country that people are proud to call home, a country that is moving forward
where people can look and believe that things are always going to be good, and
where people can feel that they're being treated equally, and that they have
access to what the country has to offer and aren't being discriminated against.
We are here building what we call our home.